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Bush Shakes Up Economic Team With Ouster of 2 Advisers

WASHINGTON, Dec. 6 - Wrestling with a shaky economy and criticism that his administration projects a muddled message on how to respond, President Bush today dismissed his Treasury secretary, Paul H. O'Neill, and the director of his National Economic Council, Lawrence B. Lindsey.

The move, announced in a brief written statement by Mr. Bush with lukewarm thanks to both men, is Mr. Bush's first cabinet shake-up in his nearly two years as president. The fate of the two officials had been the subject of speculation for months, but still came as a shock not to Mr. O'Neill, Mr. Lindsey and Mr. Bush's allies in Congress and in the business community.

Administration officials conceded in private conversations that Mr. O'Neill had first lost the confidence of the markets and then gradually of senior White House officials, especially his initial champion, Vice President Dick Cheney.

In coming months, as the White House rolls out a new tax plan and a series of other economic measures to show that the president is as focused on the economy as he is on terrorism, the officials said it was crucial that their team speak clearly and with one voice.

The president's move also demonstrates that the White House has grown increasingly concerned that Mr. Bush, like his father, could pay a political price if the country's economic woes are not addressed more forcefully.

The dismissals also come when business confidence is stubbornly low, investment is weak and joblessness is rising. Less than two hours before Mr. O'Neill surprised Washington with his resignation, the Commerce Department reported that unemployment last month surged at an unexpectedly fast rate last month, to 6 percent from 5.7.

Though administration officials said they wanted more effective spokesmen on the economy, the move did not appear to signal a broad new direction for Mr. Bush's policies. Mr. O'Neill and Mr. Lindsey took opposite sides on key internal debates. In sharp contrast to Mr. Lindsey, Mr. O'Neill persistently expressed skepticism about the need for a broad new package of tax cuts to give the economy a short-term stimulus.

Although Mr. Lindsey was a prime architect of the tax cut Mr. Bush claims has been one of his signature achievements, both he and Mr. O'Neill had been widely perceived as weak links in the Bush administration. Mr. O'Neill, in particular, attracted frequent criticism for rattling the markets with off-the-cuff remarks about the dollar and other major issues. The stock markets, which dropped after release of the new report on joblessness, climbed back up again with news of the shuffle. The Dow Jones industrial average ended the day up 22.49 points, at 8,645.77.

The White House did not announce successors for either position today, but some people close to the administration predicted that the president would settle on his choices in the coming days.

Among those mentioned by people close to the administration and on Capitol Hill as top prospects to succeed Mr. O'Neill today was Gerald R. Parsky, a California financier who served in the Treasury Department under President Gerald R. Ford and directed Mr. Bush's president campaign in California.

Other names mentioned were Donald L. Evans, the secretary of commerce; Representative Bill Archer, a Texas Republican who recently retired as chairman of the House Ways and Means Committee; and a long list of wild-card choices like Senator John B. Breaux, a Louisiana Democrat but a conservative who has supported Mr. Bush in some tax fights.

The most frequently mentioned name both inside and outside the administration for the National Economic Council, which coordinates economic advice for the president, was Stephen Friedman, a former co-chairman of Goldman Sachs. He was brought to the administration's attention by Josh Bolten, the deputy White House chief of staff, who had also worked at Goldman Sachs.

The nominee for Treasury secretary - but not the choice to head the economic council - must be confirmed by the Senate. The administration would like to have its team in place so it can begin pressing its economic plan when Congress convenes next month.

For the moment, at least, Mr. Bush has only a skeleton economic team. Even as he moves to replace the two posts being vacated today, the president must also find a replacement for Harvey L. Pitt, the chairman of the Securities and Exchange Commission.

Mr. Pitt was forced to resign last month after a disastrous effort to name the head of a new accounting oversight board, a decision at the heart of efforts to improve corporate governance following scandals from Enron to Worldcom.

Democratic lawmakers seized on today's overhaul as evidence that the Bush administration's economic policy has faltered.

``Firing its economic team is an overdue admission by the Bush administration that its economic policies have failed,'' said Senator Tom Daschle of South Dakota, the Senate's Democratic leader.

Senator Joseph I. Lieberman, Democrat of Connecticut and a former vice presidential candidate, compared the administration to the Titanic: ``When you're headed in the wrong direction, you don't just need new people in the deck chairs,'' he said. ``You need to change course.''

Republicans were restrained and somber, most limiting themselves to a few polite words.

``Ultimately, this is the president's economic team, and I will support the president and his goals,'' said Representative Bill Thomas, Republican of California and chairman of the House Ways and Means Committee.

Administration officials have been tentatively planning for Mr. Bush to deliver a major economic speech in Chicago on Dec. 17. Mr. Bush's advisers said his most urgent need was not for policy advice but for a unified and forceful sales team with which to campaign for his plan in Congress.

People close to Mr. Lindsey and Mr. O'Neill said both men thought their jobs were secure. Their bad news came on Thursday night, when Vice President Cheney and Andrew H. Card Jr., the White House chief of staff, let both know the time had come to resign.

White House officials had hoped to announce the resignations on Monday, but Mr. O'Neill angrily sent any icy letter of resignation this morning. By the time the letter was released, Mr. O'Neill had already driven back to his home city, Pittsburgh, without speaking to the press.

``There are lots of other important things to do in life,'' Mr. O'Neill said in a brief statement from the Treasury Department. The statement said he would devote himself to education and health care issues in Pittsburgh.

Word of his resignation came from the White House spokesman, Ari Fleischer, who simply said the president had accepted his resignation. Mr. Fleischer made no particular effort to commend the accomplishments of either man, instead praised them for being willing to serve.

Mr. Bush's statement included little discussion of the contributions the two men had made. ``They have served my administration and nation well,'' he said. ``I thank them for their excellent service.''

As Mr. Bush settles on a new treasury secretary, even supporters of the administration say that there are few people now within the administration who have the stature to be a credible Treasury secretary.

Kenneth Dam, the deputy secretary of Treasury, has been in charge of the department's effort to crack financial networks supporting terrorism. But that program has been plagued with problems, from recalcitrance among allies to bureaucratic warfare with law enforcement agencies and the Central Intelligence Agency.

Today, people close to Mr. Dam predicted that he would resign, as well. A spokesman for the Treasury Department refused to comment, but the department announced that Mr. Dam has canceled a trip next week to Latin America.

Mr. O'Neill, 67, was little known in Washington when he was named Treasury secretary, but he quickly gained notice for rattling financial markets with off-the-cuff remarks about the value of the dollar or the need for bailing out countries like Brazil.

But Mr. O'Neill also had substantive disputes with other members of the administration - and he was often on the losing side. Worried about the rising budget deficit, and instinctively dubious about short-term stimulus measures, he argued that the administration should adopt only narrowly defined tax cut measures aimed at particular sectors of weakness. But he was overruled by other White House advisers, and President Bush has made it clear he would unveil a ``jobs'' package in January, if not sooner.

Mr. Lindsey, a former professor of economics and a former member of the Federal Reserve Board, was on the winning side of that argument. But he was seen as a weak spokesman for economic policy, and he created a stir by publicly predicting that the cost of a war with Iraq might reach $200 billion - a much higher estimate than others circulating at the time.

If Mr. Friedman is chosen for the National Economic Council, he would give the White House a person with extensive experience on Wall Street, something that few other top officials have. Because his post is not a cabinet position, moreover, it would not require Senate confirmation or exhaustive scrutiny of his deal-making background.

That is an advantage, because White House officials are still stinging from the debacle surrounding the nomination of William H. Webster, the former F.B.I. and C.I.A. director, to lead a new oversight board for the accounting industry. Mr. Webster resigned from the job after it became known he served on the board of a company that is being investigated for potential accounting irregularities.

ASHINGTON, Dec. 6 - Wrestling with a shaky economy and criticism that his administration projects a muddled message on how to respond, President Bush today dismissed his Treasury secretary, Paul H. O'Neill, and the director of his National Economic Council, Lawrence B. Lindsey.

The move, announced in a brief written statement by Mr. Bush with lukewarm thanks to both men, is Mr. Bush's first cabinet shake-up in his nearly two years as president. The fate of the two officials had been the subject of speculation for months, but still came as a shock not to Mr. O'Neill, Mr. Lindsey and Mr. Bush's allies in Congress and in the business community.

Administration officials conceded in private conversations that Mr. O'Neill had first lost the confidence of the markets and then gradually of senior White House officials, especially his initial champion, Vice President Dick Cheney.

In coming months, as the White House rolls out a new tax plan and a series of other economic measures to show that the president is as focused on the economy as he is on terrorism, the officials said it was crucial that their team speak clearly and with one voice.

The president's move also demonstrates that the White House has grown increasingly concerned that Mr. Bush, like his father, could pay a political price if the country's economic woes are not addressed more forcefully.

The dismissals also come when business confidence is stubbornly low, investment is weak and joblessness is rising. Less than two hours before Mr. O'Neill surprised Washington with his resignation, the Commerce Department reported that unemployment last month surged at an unexpectedly fast rate last month, to 6 percent from 5.7.

Though administration officials said they wanted more effective spokesmen on the economy, the move did not appear to signal a broad new direction for Mr. Bush's policies. Mr. O'Neill and Mr. Lindsey took opposite sides on key internal debates. In sharp contrast to Mr. Lindsey, Mr. O'Neill persistently expressed skepticism about the need for a broad new package of tax cuts to give the economy a short-term stimulus.

Although Mr. Lindsey was a prime architect of the tax cut Mr. Bush claims has been one of his signature achievements, both he and Mr. O'Neill had been widely perceived as weak links in the Bush administration. Mr. O'Neill, in particular, attracted frequent criticism for rattling the markets with off-the-cuff remarks about the dollar and other major issues. The stock markets, which dropped after release of the new report on joblessness, climbed back up again with news of the shuffle. The Dow Jones industrial average ended the day up 22.49 points, at 8,645.77.

The White House did not announce successors for either position today, but some people close to the administration predicted that the president would settle on his choices in the coming days.

Among those mentioned by people close to the administration and on Capitol Hill as top prospects to succeed Mr. O'Neill today was Gerald R. Parsky, a California financier who served in the Treasury Department under President Gerald R. Ford and directed Mr. Bush's president campaign in California.

Other names mentioned were Donald L. Evans, the secretary of commerce; Representative Bill Archer, a Texas Republican who recently retired as chairman of the House Ways and Means Committee; and a long list of wild-card choices like Senator John B. Breaux, a Louisiana Democrat but a conservative who has supported Mr. Bush in some tax fights.

The most frequently mentioned name both inside and outside the administration for the National Economic Council, which coordinates economic advice for the president, was Stephen Friedman, a former co-chairman of Goldman Sachs. He was brought to the administration's attention by Josh Bolten, the deputy White House chief of staff, who had also worked at Goldman Sachs.

The nominee for Treasury secretary - but not the choice to head the economic council - must be confirmed by the Senate. The administration would like to have its team in place so it can begin pressing its economic plan when Congress convenes next month.

For the moment, at least, Mr. Bush has only a skeleton economic team. Even as he moves to replace the two posts being vacated today, the president must also find a replacement for Harvey L. Pitt, the chairman of the Securities and Exchange Commission.

Mr. Pitt was forced to resign last month after a disastrous effort to name the head of a new accounting oversight board, a decision at the heart of efforts to improve corporate governance following scandals from Enron to Worldcom.

Democratic lawmakers seized on today's overhaul as evidence that the Bush administration's economic policy has faltered.

``Firing its economic team is an overdue admission by the Bush administration that its economic policies have failed,'' said Senator Tom Daschle of South Dakota, the Senate's Democratic leader.

Senator Joseph I. Lieberman, Democrat of Connecticut and a former vice presidential candidate, compared the administration to the Titanic: ``When you're headed in the wrong direction, you don't just need new people in the deck chairs,'' he said. ``You need to change course.''

Republicans were restrained and somber, most limiting themselves to a few polite words.

``Ultimately, this is the president's economic team, and I will support the president and his goals,'' said Representative Bill Thomas, Republican of California and chairman of the House Ways and Means Committee.

Administration officials have been tentatively planning for Mr. Bush to deliver a major economic speech in Chicago on Dec. 17. Mr. Bush's advisers said his most urgent need was not for policy advice but for a unified and forceful sales team with which to campaign for his plan in Congress.

People close to Mr. Lindsey and Mr. O'Neill said both men thought their jobs were secure. Their bad news came on Thursday night, when Vice President Cheney and Andrew H. Card Jr., the White House chief of staff, let both know the time had come to resign.

White House officials had hoped to announce the resignations on Monday, but Mr. O'Neill angrily sent any icy letter of resignation this morning. By the time the letter was released, Mr. O'Neill had already driven back to his home city, Pittsburgh, without speaking to the press.

``There are lots of other important things to do in life,'' Mr. O'Neill said in a brief statement from the Treasury Department. The statement said he would devote himself to education and health care issues in Pittsburgh.

Word of his resignation came from the White House spokesman, Ari Fleischer, who simply said the president had accepted his resignation. Mr. Fleischer made no particular effort to commend the accomplishments of either man, instead praised them for being willing to serve.

Mr. Bush's statement included little discussion of the contributions the two men had made. ``They have served my administration and nation well,'' he said. ``I thank them for their excellent service.''

As Mr. Bush settles on a new treasury secretary, even supporters of the administration say that there are few people now within the administration who have the stature to be a credible Treasury secretary.

Kenneth Dam, the deputy secretary of Treasury, has been in charge of the department's effort to crack financial networks supporting terrorism. But that program has been plagued with problems, from recalcitrance among allies to bureaucratic warfare with law enforcement agencies and the Central Intelligence Agency.

Today, people close to Mr. Dam predicted that he would resign, as well. A spokesman for the Treasury Department refused to comment, but the department announced that Mr. Dam has canceled a trip next week to Latin America.

Mr. O'Neill, 67, was little known in Washington when he was named Treasury secretary, but he quickly gained notice for rattling financial markets with off-the-cuff remarks about the value of the dollar or the need for bailing out countries like Brazil.

But Mr. O'Neill also had substantive disputes with other members of the administration - and he was often on the losing side. Worried about the rising budget deficit, and instinctively dubious about short-term stimulus measures, he argued that the administration should adopt only narrowly defined tax cut measures aimed at particular sectors of weakness. But he was overruled by other White House advisers, and President Bush has made it clear he would unveil a ``jobs'' package in January, if not sooner.

Mr. Lindsey, a former professor of economics and a former member of the Federal Reserve Board, was on the winning side of that argument. But he was seen as a weak spokesman for economic policy, and he created a stir by publicly predicting that the cost of a war with Iraq might reach $200 billion - a much higher estimate than others circulating at the time.

If Mr. Friedman is chosen for the National Economic Council, he would give the White House a person with extensive experience on Wall Street, something that few other top officials have. Because his post is not a cabinet position, moreover, it would not require Senate confirmation or exhaustive scrutiny of his deal-making background.

That is an advantage, because White House officials are still stinging from the debacle surrounding the nomination of William H. Webster, the former F.B.I. and C.I.A. director, to lead a new oversight board for the accounting industry. Mr. Webster resigned from the job after it became known he served on the board of a company that is being investigated for potential accounting irregularities.